Fighting for fair oil incentives

By Sen. Gary Stevens

Thank you for inviting me to speak today. I assume I was asked as President of the Senate, but maybe I should explain being Senate President is like being head of a cemetery company. You have got a lot of folks under you but no one is paying any attention. I should know better than giving any predictions about when the Senate will get oil tax changes done.
Weeks ago I gave a schedule to the press saying that I expected the oil tax bill to be out of Senate Finance with a month for the House to consider it. But unfortunately no one in the cemetery was paying any attention. Making predictions in this business is pretty chancy. I had hoped to get the bill out of the Resource Committee early as well.
Still, they were a week and a half late.  Time will tell whether I have any better luck getting it out of Finance and across the floor to the House with hopefully a couple of weeks to consider it before the end of session and finally to the Governor who has 20 days to sign or veto it.
We want to get oil taxes right this time.  We want the best bill possible. And we need one that can pass with at least 11 votes in the Senate and hopefully more. 
So, I was asked how I thought the Senate was doing and so far. I’d have to say the House hates us. The Governor hates us. Big oil definitely hates us, as does the support industry.
I’d say, we must be doing something right. We must be doing our job. The debate on oil taxes, progressivity and decoupling has been fascinating. It reminds me of one of my students after a particularly brilliant lecture on Alaska history.
He said:  That was marvelous. You know, I was really confused when I came to class.  Now, I’m still confused, but at a much higher level. But, you know, confusion is not always bad. If it means we can see new options, use new lenses through which to view the world, be sensitive to new pitfalls and intrigued by new visions.
Still, I hope whatever bill emerges from this process will be simpler rather than complex. Shorter rather than long. Clearer rather than murky.
Pedro Van Meurs, a world renowned expert on the oil industry spoke of the political climate here in Alaska and of the dependency relationship of Alaska on the three major oil companies for most of our state budget. He believes this creates resentment among some Alaskans. I’m not sure it is resentment we have for big oil so much as a wariness. A basic mistrust due to an abusive relationship over the years.   Remember Edmund Burke’s famous quotation:  “Those who don’t know history are destined to repeat it.”  I don’t want to dwell on those abuses but I would ask you to remember just three events in our historic relationship with the industry,  so we won’t repeat them.
Surprisingly enough so many Alaskans, don’t know these events or have forgotten how important they were: Remember Amerada Hess. Remember the Exxon Valdez. And Remember Bill Allen
Those three events are not the only abuses we have experienced. I won’t dwell on the many, or even the most recent events like oil spills. These are just the three I’d like you to remember.
Alaska v. Amerada Hess was a court case which found that from 1977 to 1992 companies were guilty of “deliberate falsification in computing the price paid to Alaska for its royalty oil.” 
The 1989 Exxon Valdez oil spill was a disaster I well remember. With enormous damage to Prince William Sound, the Alaska Oil Spill Commission said Alaskans were abused in Exxon’s approach towards risk management.
I was elected to the legislature in 2000 and was surprised to see Bill Allen and Veco employees so often in the halls and offices of the Capitol. As we now know some of our elected public officials were bribed yet still voted on oil tax bills and even went to prison for their actions.
So, that’s all in the past, you may say.  Things have improved greatly.  And I want to believe that.  Still, the wise person, learns from history and remembers our past. We don’t want to be accused again of inexcusable trustfulness when dealing with the oil industry. 
The reason I bring these up has to do with the poor relationship developed over the years. Many Alaskans don’t trust the industry and that is too bad because we depend on them so much.
We deserve to get our fair share. Still, we need to work on our relationship with the industry. That relationship is primary since oil provides some 90 percent of our revenue and everything that comes out of that revenue -Education, police protection, social services, and Medicaid.  All are derivative.
The Governor’s HB 110 which passed the House last year and was sent on to the Senate reduced taxes on oil by billions and billions of dollars- almost $2 billion a year for years. For the most part, the Senate believed this was excessive and unnecessary. The Senate is working on a bill, SB192, which would address the issue of progressivity. That’s oil taxes when the price reaches high levels such as over $100 a barrel or more. This would reduce oil taxes by hundreds of millions of dollars per year.
Critics have called the Governor’s plan a giveaway of billions of dollars of Alaska’s wealth.  On the other hand, the opponents of SB192 have called this plan the real give away because they believe the decrease is too small to lead to more exploration and development. A major point of this discussion has been about how much investment by the industry would result from a reduction in oil taxes. The Administration has said HB 110 will lead to $14 billion in investments at least $5 billion by BP and Conoco and $9 billion by Armstrong.
Like Ronald Reagan, I believe in trust but verify.  Alaskans have been deceived so often by the industry that we have a right to say prove it.  Casual words are not enough.  The Senate has questioned the $5 billion investment promises by big oil on several fronts: We understand it may take years for this investment to take place. We understand it may be more than $5 billion. How long will it take, some suggest 10 years.
So we give the industry $2 billion a year: And they invest $5 billion over 10 years. In addition, we have been told that two of the big three companies can promise us anything, but it has no meaning under the Prudhoe Bay Operating agreement.
Until all three agree: Further, 60 percent of the money they invest may be ours through the tax credits we give industry to explore and develop.
I met with the head of BP here in Alaska just last week.  He asked what he could do to move the discussion forward. I told him this was one of the major issues that needed to be explained to me and I think all Alaskans.
Lately, I’ve been asking myself: What would Jay Hammond do? Hammond was a constituent of mine for some eight years. Living in the Lake and Pen Borough, I treasure the telephone calls I received from him occasionally. He always said, “this is one of your constituents from Lake Clarke.” I always knew immediately who it was.
He came to Kodiak to speak to a Senior Citizen Conference one summer.  He showed up on my doorstep at 7:30 am and said, “What do you have to do to get a cup of tea around here?”  Of course, we invited him in, made tea and had a wonderful conversation. I will never forget what he said. What a great Alaskan he was and his commitment to the constitution.  He never tired of reminding us that all natural resources are to be used for the maximum benefit of Alaskans.  What would Jay Hammond do? 
I don’t think he would be supportive of the Governor’s HB 110. That’s why I liked so much Kate Troll’s article in the Sunday Juneau Empire (3/25/12).  She asked “What would Wally Hickel have to say about our current oil tax debate?   She quoted Hickel as saying that the industry doesn’t own us.  We, not they, own our state lands and resources.  It is our country, not theirs. He said, the issue at Prudhoe Bay is “if we are being ripped off.”  Six months before his death he wrote:  “Meanwhile, the oil industry and the companies that depend on them are flocking to support candidates for governor and the Legislature who will do their bidding.  Pressure is being applied to rewrite ACES.” 
Isn’t that interesting. Hickel was concerned that the oil companies and the support industry in the last election two years ago were supporting and funding candidates for governor and the legislature who would do their bidding.  We are already beginning to see this happen for the coming elections in August and November.

Sen. Gary Stevens represents District R, including Homer. This is an excerpt of his floor speech March 26 in Juneau.

Contact the writer
Posted by on Apr 4th, 2012 and filed under Point of View. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

1 Response for “Fighting for fair oil incentives”

  1. Zeno says:

    Oil companies run Alaska not the other way around. And for most, that yearly PFD makes us much less likely to hold the oil companies to the same taxes that other corporations pay. Buy stock in oil companies if you want to get rich. Stop using so much oil if you want to be good.

Comments are closed

Like us on Facebook